Question

Your younger sister, Susie, will start college in five years.  She has just informed your parents that she wants to go to Collegiate U., which will cost $ 8,000 per year for four years (assumed to come at the end of end year).  Anticipating Susie’s ambitions, your parents started investing $ 1,000 per year five years ago and will continue to do so for five more years.  

 

How much more will your parents have to invest each year for the next five years to have the necessary funds for Susie’s education?  Use 10 percent as the appropriate interest rate throughout this problem (for discounting or compounding).